39. Memorandum From C. Fred Bergsten of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

  • SUBJECT
    • Flanigan Proposals on Handling of Oil Import Study

Flanigan Proposals

Peter Flanigan at Tab B2 recommends a scenario to deal with the report of the Cabinet Task Force on Oil Imports, when it is delivered to the President on February 2:

1.
Immediate publication of the report.
2.
Simultaneous announcement that State and Defense will discuss its implications with our allies, including NATO and Japan as well as supplying countries.
3.
Creation of an office in the White House to receive comments from interested parties on the report’s recommendations.
4.
“Clean up” of the present program, as proposed by Secretaries Stans and Hickel,3 while the other steps proceed.

The objectives of this strategy appear to be two-fold: to delay any decision, and to reform the present program sufficiently to obviate altogether the need for more fundamental change.

General Considerations

I fully understand the political desirability of deferring, and perhaps avoiding forever, a decision on this issue. I also fully understand [Page 99]your desire to try to avoid playing a leading role in it. Nevertheless, you should be aware of the following considerations:

1.
The proposed scenario will intensify the public debate on the issue, particularly as the Congressional elections draw near, increasing the political pressure from all sides.
2.
Failure to make a decision will generate charges that the President is indecisive. It is, of course, true that the facts and the analysis are in dispute—but they always are on hard decisions.
3.
It is an undesirable principle—especially from our standpoint—to justify delaying or avoiding a decision on national security and foreign policy grounds when the real reason is domestic politics. Since all interested domestic parties have already had a full chance to present their views, the main rationale for delay would be in our area. The Administration came under some criticism for justifying its political decision in the Trans Pacific air case on foreign policy grounds, and this one would be much more obvious.
4.
Failure to adopt the Task Force recommendations, and even a delay in making a decision on them, will cause serious foreign policy problems. All of the major oil suppliers—especially Canada and Venezuela—anticipate major benefits from a new U.S. program. (See latest Caracas cable at Tab C.)4 They will be bitterly disappointed by continuation of the status quo, which is the best that the Stans-Hickel approach will mean to them. (Stans and Hickel do make a vague reference to new preferences for Venezuela, but implemented via new gimmicks in the allocation of quota tickets—hardly a “clean up” of the program. Their whole report is extremely vague on precisely those parts which could cause foreign policy problems, however, so we cannot tell precisely what would happen.)
5.
The Stans-Hickel recommendations would have several negative foreign policy effects:
(a)
A phase out of the “Puerto Rican preferences” would hurt Venezuela.5
(b)
Mexico would lose its present exemption from import control.
(c)
We would have to slap controls on oil imports from Canada, which will cause a major row with them—particularly when they are anticipating totally free access and highly favorable discrimination as proposed by the Task Force!
(d)
It would make it more difficult to do favors for our friends outside the Western Hemisphere, such as Iran, Saudi Arabia, or Indonesia.
6.
I don’t think you can avoid getting heavily into this, though I share your desire to do so and have made every effort in that direction myself. The control program has to be justified on national security grounds. It has major foreign policy implications. Flanigan told me that the President would want to say that you concurred personally in any new program, and it will be extremely hard to defend the Stans-Hickel approach on security grounds. If this is so, I believe you should move now—before the situation becomes even worse.

Venezuelan Problem

Pete Vaky recommends6 that we consult meaningfully with Venezuela on our deliberations on the Task Force study as we proceed, inform them of any final decision as far ahead of its publication as possible, and inform them of any changes in the present program—such as the Stans-Hickel “clean up”—which would affect them. I believe that we should do the same with Canada. A memorandum asking Flanigan to direct the agencies to take these steps is at Tab A.7

Recommendations:

1.
That you explore with Flanigan the “General Considerations” concerning his scenario cited above, before deciding whether to approve it.
2.
That you sign the memorandum to Flanigan at Tab A, conveying to him the three points made by Vaky on consultation with Venezuela and indicating that the Canadians must also be kept fully informed.
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 367, Subject Files, Oil 1970. Confidential. Sent for action. Concurred in by Vaky and Saunders.
  2. Attached but not printed is Tab B, January 13.
  3. A reference to the Minority Report, Document 34.
  4. Not attached and not further identified.
  5. A handwritten notation by Kissinger reads: “Tell me again what this is.” As Bergsten explained it to Kissinger in a January 27 memorandum, after 1965 the Department of the Interior negotiated “special deals” with several companies, allowing them to import into Puerto Rico greater amounts of crude (than allowed under the current system) for processing into product exports to the mainland, provided the crude came from Venezuela. The companies were then obliged to increase employment and foster economic development through increased investment. Hickel in particular wanted to prohibit further special deals, which Bergsten explained would lead to the extinction of the present Venezuelan preference in Puerto Rico. (National Archives, Nixon Presidential Materials, NSC Files, Box 367, Subject Files, Oil 1970)
  6. See Document 36.
  7. Not attached. The memorandum is printed as Document 40.